Want a cheap credit card? Go to a small bank or credit union

The big banks are a near-constant presence on TV and direct mail, trying to win your credit card business.

While they're the dominant players — and they're desperate to keep customers happy with points, cash-back bonuses and near-daily deals — The Wall Street Journal reports that community banks are making a comeback in the credit business after sitting out for years.

And, of course, credit unions have long been an alternative.

But what can that small bank or credit union down the street offer you that a major bank can’t?

When it comes to credit cards, the little guys often tend to have better policies, lower interest rates and fewer fees — exactly what you should look for in a new card — while the big banks dominate in rewards and technology.

"Credit unions and small banks can give you a better rate because they don’t have the same overhead," says Beverly Blair Harzog, an independent credit expert and consumer advocate. "And if you’re on that borderline between having ‘fair’ credit and having ‘good’ credit, the small bank may take a chance on you, while the big bank won’t."

In 2011, The Pew Charitable Trusts found credit unions, on average, offer interest rates that are three percentage points lower than major banks. Regional and community banks often charge lower than the big guys, too.

Average credit card rates

Card type

APR

Low interest cards

10.95%

Cash-back cards

16.38%

Balance transfer cards

15.88%

Rewards cards

15.73%

Indeed, the average annual percentage rate on all cards stands at 15%, according to CreditCards.com. But you can find APRs below 10% at many smaller banks and credit unions.

For example, M&T Bank (www.mtb.com), with 700 branches on the East Coast, offers a no-frills Visa card with an APR as low as 9.24%.

Simmons First in Arkansas (www.simmonsfirst.com) charges as little as 7.25% APR for its Platinum Visa.

Even some of the largest credit unions beat the big banks.

Pentagon Federal Credit Union (www.penfed.org), which anyone can qualify for through a onetime $20 membership to the National Military Family Association, offers the PenFed Promise card, which charges no fees.

The APR is an introductory 7.49% for the first 36 months, then it varies with the prime rate (it’s currently at 9.99%).

Reason 2.You'll pay less to transfer balances from high-interest cards.

While the banks’ standard had been to charge you a balance transfer fee of 3%, capped at a certain amount, the Pew study found the average balance transfer fee is now 4%, and many banks don’t have a max cap.

If you want to transfer a $10,000 card balance, that’s $400 extra you’ll be forced to add to that amount.

Credit unions’ average balance transfer fee is 2.5%, but many of them, along with regional banks, offer balance transfers that charge little or no interest.

Reason 3.You still can find decent rewards.

Yes, the big boys can offer the best rewards programs, but it often comes at a cost — a higher interest rate or a big annual fee. Typically, you can still grab 1% cash back or 1 point per dollar spent at a community bank or credit union.

M&T Bank’s Visa Rewards Card offers 1 point per dollar spent, but it charges APRs of as low as 11.24%, well below what the major banks offer. And M&T is offering 11,000 bonus points for $1,000 spent on the card within the first three months.

Simmons First Visa Platinum Travel Rewards also offers 1 point per dollar spent, but its APR is a low 9.25%.

You have the choice of using your points on any U.S. airline, with no blackout dates, although the redemption rates aren’t that great — 28,000 points will get you a domestic coach ticket worth $500. You can also redeem points for hotels, cruises, vacation packages and restaurants.

For those who want to transfer a balance, PenFed is waiving its balance transfer fee until Dec. 31 (after that, it goes back to 3%, with a maximum charge of $250). The 4.99% APR on balance transfers made before Dec. 31 is for the life of that balance; in 2013, it goes back to 9.99%.

Navy Federal Credit Union's CashRewards card (www.navyfederal.org) — available to military personnel and their close relatives — gives 1% cash back on purchases up to $10,000 annually, 1.5% after that. The interest rate is just 9.65%.

Reason 4.You're more likely to get personal service.

If you’re tired of getting stuck in a phone tree when you call one of the big companies, small banks and credit unions may be a refreshing change, as they pride themselves on excellent customer service and connecting customers to real live people over the phone.

On the flip side, many smaller financial institutions may not be as tech-savvy. Big banks often have the advantage when it comes to offering the latest in online banking, mobile apps and other cutting-edge technology, says Ben Rogers, research director at the Filene Research Institute, which conducts research on credit unions.

When checking out a community bank or credit union, see if you have the options of paying bills online or doing mobile banking and whether you’ll need to pay a fee for doing so. Rogers also recommends asking whether the credit union or community bank processes payments for bills paid online the same day.

There is one thing to keep in mind when looking at a smaller institution: Unlike the big banks, the little guy might not want you — even if you have perfect credit.

Case in point is First Tennessee Bank (www.firsttennessee.com), headquartered in Memphis. Its Platinum Premier Visa currently has the lowest interest rate out there — a fixed introductory rate of 3.9% for six months, then an APR between 5.15% and 13.15%, depending on your credit score.

The catch: You have to be a Tennessee resident to get this card.

And you can’t just join any credit union. Because they’re defined by their field of membership, credit unions require that members belong to some qualifying group, usually meaning specific communities, employers or organizations.

But credit unions are everywhere, so it’s inevitable that you’ll be eligible for at least one in your area.